Sizing Up the Competition

Managing your company should be no different. "It's fundamental to know what the other shops around you are doing," says Tom Ham, president and owner of Hams Automotive in Grand Rapids, Mich. You're in it to win, and the way to win big is to understand the opposition. In business, this is accomplished with a competitive analysis.

The task is to identify your competitors' strengths and weaknesses by scrutinizing their operations. Then you can leverage your strengths and exploit their weaknesses to the tune of new clients, stronger loyalty from repeat clients and increased revenue. If this sounds like a winning game plan, let's move into the playbook.

Step 1: Who Are The Opposing Teams?

While you probably have a general idea of who your competitors are, it's important to select the right ones for this analysis. Your direct competitors are any that offer the same services as you, including neighboring independents, the dealers, mass merchandisers and quick lubes.

"List the top three reasons you believe people should work with you," says Carol Septow, president of Septow + Associates LLC, a marketing and communications consultancy in Chicago. "List the top three reasons why you think the top competitor is thriving. Now do the research."

Identify your primary competitors based on their proximity to you, their strength in the marketplace, or their similarity to your business. In the case of Ham's Automotive, which specializes in Asian imports, its primary competitors are other Asian specialty shops and Honda, Toyota and Nissan dealers.

"Start small and look at five competitors," Septow says. "Review their Web sites, advertising. Send decoys into the facility to see how they're treated, what services are offered, how the place looks and how they feel about working with these people. Compare the results with the same criteria from your own efforts. Measure the information against that top three list. What do you see?"

Step 2: Who Are Their Fans?

Think about the demographics, psychographics, driving habits, etc. of your clients vs. your competitors. For a more complete picture, enlist the help of friends and family as "secret shoppers." Ask them to take their cars to these businesses for oil changes and other small services, and instruct them to observe the operation while they wait.

At Ham's Automotive, they recruit family members three to four times annually to evaluate their main competitors. Each family member is sent to the competing business for a basic service, and they complete a four-page checklist documenting the visit.

"It allows us to be better when we're talking with the customer on the phone or in person," says Ham, who also operates the forum Web site AutomotiveManagementNetwork.com and Hams Management Systems, a teaching and consulting business. "We kind of know what they're being offered and what they're being told at the other facilities, which allows us to tailor our answers to what they're doing."

Step 3: What Do They Have to Offer?

Make a list of your services from oil changes to detailing and see how that compares to each of your competitors. Go beyond what you already know and examine the specifics. Who's offering services you aren't but should consider and vice versa? It may mean the purchase of new equipment or updating diagnostic tools, but in each of those is the opportunity to increase revenue. Also look for opportunities for complementary services, such as detailing, accessorizing or selling wheels. Your secret shoppers can give this portion of your project a substantial boost.

Step 4: The Price is Right

The goal with this exercise is to see where your pricing lies in relation to your competitors. You need to determine what the competition is charging per labor hour for services and for diagnostics, as well as for a handful of common services, such as front brakes and rotors. A lot of this information can be gathered from newspaper ads and direct mail pieces that you, your staff, family and friends receive from time to time. If you go the route of secret shoppers, they also can gather a lot of this information for you.

You may also choose to have a part-time employee make phone calls for price estimates. Ham's Automotive conducts an annual price survey of common services, such as a coolant flush or oil change. "A lot of consumers will judge you initially by common service pricing," Ham says. "They use this to determine if you're competitive or at least in the ballpark."

Step 5: Judge the Book By the Cover

Analyze your competition's facilities (inside and out). Are they large, bright and clean or small, dingy and cluttered? Is the customer area comfortable and clean or noisy and dirty? Include observations on the ease of access pulling in and out of the facility, as well as how easy it is for a client to find parking.

Step 6: Fan Appreciation

Many dealers have kicked it up a couple of notches in the customer amenities area. They've added spacious business centers and children's play areas. Some even have ice cream and other novelties to entice clients — particularly new car buyers. While you don't need to add a lunch buffet, you should be on par or above par with benefits like loaner cars, rides for clients and hours of business.

Step 7: In the Media

Your final task is to see how your competitors are promoting their businesses. Peruse local newspapers, magazines and your mail box for advertisements. Visit competitors' Web sites and look for pay-per-click ad campaigns, listen to the radio, watch for TV commercials. Keep a file of everything you collect and see what dominant message each of your competitors is selling. How does this compare to your own marketing message?

"A family-owned automotive service business needs to consider their messaging and differentiation in their market as much as a corporation with capital to launch an elaborate campaign," Septow says. "In fact, the small business has more to lose because the slope to business extinction is greater...Doing nothing to manage marketplace perception does not mean that no perception is being created. It means that the people with the most at stake and the power to control it are leaving the task to the tastes of a fickle buyer."

Game Wrap Up

Now that you've collected this extensive amount of information, it's time to put it to work for you. Take a look at those businesses that are successful and those that aren't, Septow says, advising that you and your team ask these tough questions:

• What are the messages that successful businesses are sending?
• How are they demonstrating an understanding of consumer needs and desires beyond the facts?
• Have they tapped into emotional buying cues?

"If you're also offering free loaners and car washes, but aren't enjoying great revenues, it may be that those aren't the value promises that customers need," she says. "Dig deeper to find the promises that are resonating."

From this, identify two to five action items, and come up with a game plan designed to leverage your strengths and capitalize on your competitors' weaknesses. Whether it's through advertising, refining your sales process or promoting client pick up and drop off, you're now armed with all of the information you need to take the lead in this highly competitive automotive service business.